Patterns and determinants of entry and exit in industrial sectors in Sweden

Abstract

This paper uses a unique dataset which gives a complete picture of the pattern of entry and exit in industrial sectors in Sweden during the period 1997–2001. The importance of profitability, industrial market growth, tangible capital intensity, intangible capital intensity and economies of scale for entry and exit are investigated. A fixed effects panel data model is used, and it is shown that the inclusion of unobserved industry-specific effects explains many of the inter-industrial differences in entry and exit rates. For policymakers, this implies that it is difficult to formulate an entrepreneurship policy that can be expected to be equally successful across all industries. It is also shown that investments in intangible assets is one way to compete, while economies of scale tend to deter entry rates.